IHT - Special Guardianship, Joint Account, Regular Payments & Gifts

JamieKendal

I am attempting to complete the paperwork for my late mother's estate. An aspect of it is proving to be very problematic and I was hoping someone here may be able to provide some guidance, which might help when I phone HMRC to discuss this. 

My parents became Special Guardians for their grandson, my nephew, in 2009. My parents began receiving a Fostering Regular Weekly Allowance for their grandson, Child Benefits and Child Tax Credits in 2010. No other form of income entered the account; it was expressly set up to support them and their grandson. 

In 2014 my mother set up a standing order to pay a monthly amount into a children's savings account. Over time this ran up a substantial surplus. These regular payments continued after he turned 18 and they still receive benefits until he was 20 as he attended college. 

Regular payments received as a child into a savings account are disregarded, as are any of these payments over 7 years.

Years 2022/23 and 2023/24 no income was received into the account yet regular payments into the savings account (now matured from children's savings account) continued. Would these payments be classed as 'gifts out of normal expenditure' or simply as payments or, as my mother believed, from my nephews own money accrued via his receipt of Fostering Allowance?

It can very easily be demonstrated that the money was actually his own money from his allowance but I am worried about how HMRC may view the payments as they came from my parents' joint account. 

Apologies for the lengthy post, I just wanted to try and explain everything. 

Any help would be greatly appreciated as I have spent weeks working on this aspect of the paper work. I am in a real state as my Dad only passed a few weeks ago. Thank you. 

Keep_pedalling

The payments to your parents are intended to help cover the additional expenses they would face in caring for their GC. Paying some or all of this into his account would certainly be classed as a gift. If their other income was sufficient to cover their expenditure (including the additional expenditure fot the GC) then yes it could be claimed as gifts from excess income. 

Whether it is worth claiming this or not is rather dependant on if the gifts would take her estate into IHT territory or over £650k which would require claiming the RNRB.

JamieKendal

Thanks. The Fostering Regular Weekly Allowance by the council for the GC appears to cover all regular payments made into the child's savings account. There was surplus both from the FRWA, which he was given as annually exempt gifts,  as well as Child Benefits and Child Tax Credits but most of that was spent to cover costs of care.

Your point about other income sources could really make it all demonstrably easier to cover, so I will definitely take a look that. Also, I am already going to claim for RNRB but we are still 120-130K off the threshold. 

I cannot remember where I read this and I could be wrong, but if there are any gifts that can't be covered by income or exemption, are they just added to the estate? eg, £2000 of gifts over 2 years to the GC where the annual exemption has already been used, is that just added to value of the estate? 

Sorry I'm tired out. I hope that all makes sense. Thanks again. 

JamieKendal

Keep_pedalling said:

The payments to your parents are intended to help cover the additional expenses they would face in caring for their GC. Paying some or all of this into his account would certainly be classed as a gift. If their other income was sufficient to cover their expenditure (including the additional expenditure fot the GC) then yes it could be claimed as gifts from excess income. 

Whether it is worth claiming this or not is rather dependant on if the gifts would take her estate into IHT territory or over £650k which would require claiming the RNRB.

Hi Keep_pedalling, 

I just wanted to say thank you for your suggestion. I have been through other bank statements and income for one grandparent proves to be sufficient to cover the shortfall for regular payments to the grandson for the relevant years. 

I had become so focused on the joint account and your suggestion really opened my eyes to how to resolve this issue, which had been plaguing me for many days.

You don't know how much stress this has relieved me of - much gratitude!